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ACCF/NAM State by State Analyses of the Economic Impact of theLieberman-Warner Climate Security Act
The American Council for Capital Formation (ACCF) and the National Association of Manufacturers(NAM) unveiled a jointly commissioned study assessing the potential national and state economicimpacts resulting from proposed climate change legislation, America's Climate Security Act of 2007(S. 2191), authored by U.S. Senators Joseph Lieberman and John Warner.S. 2191 aims to reduce total U.S. greenhouse gas emissions with the goal of lowering emissions 63percent below their 2005 levels by the year 2050. These reductions would be achieved through asystem that would call for companies to cap their emissions, and then to have them trade emissionsrights with each other.Conducted by Science Applications International Corporation (SAIC) using assumptions provided byACCF and NAM, the study unveiled today examines the implications of the legislation with respect toGross Domestic Product and Gross State Product, future energy costs, economic growth,employment, production, household income, the impact on low income earners and other measurements.The following pages are specific overviews of the impacts the legislation could have on each of the 50U.S. states.
About NAM
The National Association of Manufacturers is the nation’s largest industrial trade association,representing small and large manufacturers in every industrial sector and in all 50 states.Headquartered in Washington, D.C., the NAM has 11 additional offices across the country.
About ACCF
The American Council for Capital Formation (www.accf.org) is a nonprofit, nonpartisan organizationdedicated to the advocacy of tax and environmental policies that encourage saving and investment.The ACCF was founded in 1973 and is supported by the voluntary contributions of corporations,associations, foundations, and individuals.
 
-17.20-44.72-25.87-59.53
-70-60-50-40-30-20-100
Figure 2. Loss in Employment
2020
 
2030
   T   h  o  u  s  a  n   d  s  o   f   J  o   b  s
  .
AL-LowAL-High
Figure 3. Loss of Disposable Incomeper Household
 
2020
 
2030
-2,611-6,257-805-3,431
-7,000-6,000-5,000-4,000-3,000-2,000-1,0000
   D   o   l   l   a   r   s
AL LowAL High
 AlabamaEconomic Impact on the State from the Lieberman-WarnerProposed Legislation to Reduce Greenhouse Gas Emissions
Understanding the economic impacts of the Lieberman-Warner Climate Security Act
1
(L/W bill) can help guidechoices on climate change policy.
2
In this study, the L/Wbill was analyzed under low and high cost cases withrespect to a baseline that projects the future in the absenceof the bill. The L/W bill would enforce a nationwide capand trade program for the emissions of greenhouse gases(GHGs) and would reduce GHG emissions covered by thebill to 4,992 Million Metric Tons of CO
2
(MMTCO
2
) by2020 and 3,856 MMTCO
2
by 2030 (Figure 1). L/W setstargets that would reduce GHG emissions to 15% below2005 levels by 2020; 30% below 2005 levels by 2030; and70% below 2005 levels by 2050. Covered emissions areassumed to include everything from combustion of fossilfuels in the United States, plus non-CO
2
GHG emissionsincluded in the L/W cap. The price of carbon permits (whatcompanies must pay to emit CO
2
) could reach between $55and $64 per metric ton of CO
2
(MT) by 2020 and couldincrease to between $227/MT and $271/MT by 2030.
3
 
Impact on Jobs
Under L/W, Alabama would lose 17,200 to 25,874 jobs in2020 and 44,721 to 59,530 jobs in 2030 (Figure 2). Theprimary cause of job losses would be lower industrialoutput due to higher energy prices, the high cost of complying with required emissions cuts, and greatercompetition from overseas manufacturers with lowerenergy costs.
Decrease in Disposable Household Income
Higher energy prices would have ripple impacts on pricesthroughout the economy and would impose a financial coston households. Alabama would see disposable householdincome reduced by $805 to $2,611 per year by 2020 and$3,431 to $6,257 by 2030 (Figure 3).
L/W’s Impact on Energy Prices
Most energy prices would rise under L/W, particularly coal,oil, and natural gas. The price of gasoline in Alabamawould increase between 74% and 144% by 2030, whileelectricity prices would increase by 122% to 159%. Table 1shows the increase in electricity, gasoline, and natural gasprices faced by a typical Alabama household compared tonational household increases. Alabama residents would paybetween 99% and 142% more for their natural gas by 2030.
1
S. 2191
2
The study used the National Energy Modeling System (NEMS) and assumptions provided by ACCF and NAM for this analysis. NEMS is used by the US EnergyInformation Administration for energy forecasting and policy analysis. “Low” refers to the Low Cost Case, which assumes higher nuclear capacity, less constraintson new generating technologies, etc. Both cases use higher capital costs than the baseline. “High” refers to the High Cost Case, which assumes low nuclearadditions, constrained new generation technologies, high oil prices, etc. (See the full report for all assumptions).
3
All dollar figures in this report are presented in constant 2007 dollars.
 
Figure 3: Household Impact Relative to Baseline(Annual Dollars Lost per Household)Figure 2: Loss in Employment Relative to BaselineThousands of JobsFigure 1. US CO2 Emissions and S. 2191 Targets
 
 
Figure 4. Loss in Gross State Product
 
2020 2030
-$2.57-$1.86-$6.85-$8.08
-$9.00-$8.00-$7.00-$6.00-$5.00-$4.00-$3.00-$2.00-$1.00$0.00
   B    i   l   l    i   o   n   s   o    f   D   o   l   l   a   r   s
AL- LowAL - High
Figure 5. Percent Change in Output by Industry in2020
-5.9%-9.5%-13.2%-6.5%-4.8%-5.9%-7.5%-3.5%
-20%-15%-10%-5%0%MAN EIS TRAN PAP
AL Low AL High
Figure 6. Percent Change in Production bySector in 2020
-18.5%-22.1%1.5%0.9%
-30%-25%-20%-15%-10%-5%0%5%Coal Electricity
AL Low AL High
SectorYearLowHigh202032%40%2030122%159%202021%70%203074%144%202025%35%203099%142%Table 1: Change in Energy Prices at Household Level(% change from baseline)ALElectricity(Residential)Gasoline (Retail)Natural Gas(Residential)
Factors Contributing to Higher Electricity Prices
L/W would reduce GHG emissions from all sectors of theeconomy (transportation, residential, commercial, andindustry); however, as the largest emitter of GHGs, theprimary impact would fall on the electric sector. L/Wwould result in the electric industry shutting down mostcarbon-based generation and/or using expensive, as yetunproven technology, to capture and store CO
2
. To meetthe stringent goals of L/W, the electric industry would alsohave to substitute high cost technologies, such as biomassand wind, for conventional generation.
Impact on Economic Growth
High energy prices, fewer jobs, and loss of industrial outputare estimated to reduce Alabama’s gross state product(GSP) by between $1.9 and $2.6 billion per year by 2020and $6.8 and $8.1 billion by 2030 (Figure 4).
Impact on Industry
 
Alabama’s major economic sectors will be affected byemission caps (Figure 5).
4
The current two largest sectors,transportation manufacturing and paper manufacturing,show decreases in output of 5.9% to 13.2% and 4.8% to6.5%, respectively in 2020. All manufacturing sectors willsuffer output losses of between 3.5% and 5.9% by 2020,while output from energy intensive sectors fall between7.5% and 9.5%. Alabama’s coal production would fallbetween 18.5% and 22.1%, although due to its low cost of generation, electricity supply could rise slightly over thebaseline forecast (Figure 6). These continued losses willhave a lasting effect on the economic base of Alabama.
Impact on Low Income Families
5
 
The impacts of L/W will be felt especially by the poor, whospend more of their income on energy and other goods thanother income brackets. By 2020, higher energy prices meanthat low income families in Alabama (with averageincomes of $12,945) will spend between 22% and 25% of their income on energy under L/W compared to a projected19% without L/W. Others on fixed incomes, such as theelderly will also suffer disproportionately.
Impact on State Budgets
6
 
The increases in Alabama’s energy costs under L/W willimpact expenditures throughout the state. Specifically,Alabama’s 2,069 schools and universities and 134 hospitalswill likely experience a 28% to 35% percent increase inexpenditures by 2020 and a 91% to 123% increase by 2030.For government entities, costs for services, including public
 transportation
and vehicle fleets, such as school buses, willalso rise under L/W.
 
4
MAN = Manufacturing, EIS = Energy Intensive Sectors; TRAN = Transportation equipment manufacturing; PAP = Paper products manufacturing.
5
These projections assume that the energy expenditures by income quintile in the state are the same as the average for the census division, since there is insufficientdata to accurately calculate this quantity on the state level.
6
These projections assume that the expenditures on schools and hospitals are the same as the average for the census region, since there is insufficient data toaccurately calculate these quantities on the state level.
Figure 6: Impact on ProductionPercentage Change from Baseline in 2020Figure 5: Impact on Industrial Value of ShipmentsPercentage Change from Baseline in 2020Figure 4: Annual Impact of GSP Relativeto Baseline Billion 2007$
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